You’ve been talking about it for ages now. In fact, it’s sat at the top of your to-do list for years.
Only...there’s always something else on the horizon that sends it back down the list, right?
We’re talking about your finances! Or, rather, your lack thereof.
Whether it’s buying only what you need, spending less than you earn, or paying off debt, with a little commitment and our tips below there are countless ways you can rejuvenate your personal finances and live your best financial life. Here’s how you can finally make it happen in one helpful list.
1) Create a budget (and stick to it)
The key to taking back control of your personal finances is found in creating, and sticking to, a budget.
The best budgets are the kind that are easy to make (whether you use a simple spreadsheet, a piece of paper or an online tool), simple to stick to, and empower you to plan for larger expenses down the track while ensuring you’re meeting all your day-to-day costs.
Speaking of expenses, it’s important to be realistic and not ‘guess’ at what they might be. . Reviewing last year’s or even last month’s bank statements is a good reminder of various expenses that can be easily forgotten like pet check-ups, subscriptions, or car registration.
Once you’ve deducted your expenses from your income, you’ll be able to determine if there’s anything left over to save or pay off debt. You’ll also get much needed insight into areas that you might be overspending or could potentially cut back.
A useful budgeting guide for allocating your finances is , where you aim to spend 50 percent of your income on necessities (rent or mortgage and utilities), 30 percent on ‘nice-to-haves’ (entertainment, travel, shopping) and 20 percent on savings or debt repayment (retirement, student loans).
2) Take on a side-hustle
A side-hustle around your nine to five is a great way to bring in extra cash. The kind of cash that can be funnelled directly to your savings, or to paying off your debts that much quicker.
Earning a little extra on the side doesn’t have to involve back-breaking manual labour, either. It could be as simple as , applying for part-time work, contracting out your services for dog walking or selling your crafts online.
Ideally your second job shouldn’t interfere with your main source of income.
Oh, and don’t forget about your tax obligations on this additional income!
3) Curb your expenditure
If you’ve created a budget and diligently tracked all your expenses you may be staggered at how much you’ve frivolously spent on takeaways or entertainment. Now is the perfect time to heed the wake-up call and slash your spending.
We’re not suggesting you stop spending all together. At the end of the day, there’s only so much you can cut from your budget when there’s little to work with in the first place. That said, a few quick and easy ideas such as taking your own lunch to work or you may no longer use is an easy way to make a quick buck.
The bottom line? Limit your spending by only buying what you really need. Don’t step inside a shop or grocery store unless you’re armed with a list and the determination to stick to it.
4) Set financial goals
A budget creates a framework for day-to-day financial housekeeping, but it’s the setting of financial goals that really puts the focus on the bigger picture and gives you something to really work towards.
Perhaps it’s financing a new car? Buying your first home? Or retiring early ? Whatever your dream, make certain your goals are SMART: Specific, Measurable, Achievable, Relevant, and Timely.
5) Don’t forget your emergency fund
Surveys in the UK and America highlight that one in three people are just one missed paycheck away from financial disaster. What’s more, a third of the population don’t have emergency funds put aside to cover any unexpected expenses.
Sometimes life goes pear shaped; your car breaks down, your roof starts to leak or you need a tooth pulled. Or worst-case scenario, . These are the times you need to dip into an emergency fund.
Stashing cash in a bank account, and forgetting about it, so you can draw on it in times of emergencies is a great way to reduce your stress levels and the chances of going into debt – possibly on the worst terms when you’re at your most desperate.
As a minimum, experts say to set aside an emergency fund of $1,000 to cover an unexpected expense. At best, aim to put aside enough money to cover six months’ worth of expenses in case you aren’t able to work or you lose your job.
6) Live thriftily
If you’re serious about starting a true financial revolution under your roof, then tightening your belt is a good place to start. Living on less than you earn sounds simple in theory. Yet as Parkinson's Law dictates, our expenditure often rises to meet our income. The trick is to recognise this and reverse it.
Spending less doesn’t have to be a hardship. Looking for ways to live a simpler life, and for less, can be a fun challenge for the whole family. In fact, living simply usually has the added benefit of !
There is a huge shift away from consumerism toward downsizing and minimalist living. If you’re not sure where to start the internet bulges with ways you can spend less and save on everything from your grocery bill to gift giving.
7) Deal to your debt
Kiwi’s debt is at a record high: the household debt-to-income ratio has increased dramatically, up from 46 percent in 1988 to 166 per cent in 2018.To get ahead financially, eliminating debt should be a top priority.
There are two smart ways to prioritise paying off debts: and the Snowball methods.
If you’re disciplined with your finances give the Avalanche method a try. This system sees you paying off debts with the highest interest first, and then focusing on the next highest interest debt and so on and so forth.
The Debt Snowball method, on the other hand, is perfect if you need some motivation to stay on track. Using this system you pay off your smallest debt first, regardless of interest rate, and then concentrate on your next smallest debt and so on, until all debts are paid.
Most important of all – don’t add to your debt!
8) Leverage extra cash
If you have some cash that you can lock away without needing to access it, consider placing it in a Term Deposit. give you a fixed interest rate over a set term, so at the end of the term you know exactly how much principal you have and what interest you have earned.
With the extra cash you earn from these savings, you could further pay down your debts, or fund your next purchase outright so you don’t have to rely on costly credit cards or personal loans.
9) Save for retirement
The epitome of financial success is the freedom to stop working either at retirement age, or when you choose to, and still be able to live comfortably without financial stress.
Having this freedom means planning ahead and sacrificing short term expenditure for long term rewards. Whatever retirement savings option you choose - savings, retirement savings schemes like KiwiSaver or investments - one day you’ll thank your younger self.
It’s time for a new financial you
The best time to revitalise your finances was yesterday. The next best time? It’s now! By incorporating a few of the above tips and tricks and focussing on cultivating good financial habits, they’ll pay dividends in the years to come.
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